Efficient breach of international law: Optimal remedies, "legalized noncompliance," and related issues

Michigan Law Review

Volumn 110, Issue 2, 2011, Pages 243-294

  Posner, Eric A ^a   Sykes, Alan O ^b  

^a UNIVERSITY OF CHICAGO LAW SCHOOL   (United States)

^b STANFORD LAW SCHOOL   (United States)

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[No Author keywords available]

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EID: 80655148159     PISSN: 00262234     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (225)

1. Lori Fisler Damrosch et al., International Law: Cases and Materials 713-32 (4th ed. 2001);
2. Peter Malanczuk, Akehurst's Modern Introduction to International Law 269-72 (7th rev. ed. 1997);
3. L. Oppenheim, International Law: A Treatise 352-57 (H. Lauterpacht ed., 8th ed. 1955).
4. A popular treatise, Mark Weston Janis, International Law (5th ed. 2008), contains nothing on remedies. A collection of essays ostensibly about remedies, Remedies in International Law: The Institutional Dilemma (Malcolm D. Evans ed., 1998), focuses on dispute resolution.
5. Malcolm Shaw, A Practical Look at the International Court of Justice, in Remedies in International Law, supra note 1, at 11-26 ("[The International Court of Justice] has not as yet developed a clear pattern of applicable remedies").
6. Responsibility of States for Internationally Wrongful Acts, G.A. Res. 56-83, U.N. Doc. A/RES/56/83 (Jan. 28, 2002) [hereinafter ILC Draft], available at http://untreaty.un.org/ilc/texts/instruments/english/draft%20articles/9_6_2001.pdf.
7. For commentaries on the draft articles, see Rep. of the Int'l Law Comm'n, 53d Sess., Apr. 23-June 1, July 2-Aug. 10, 2001, U.N. Doc. A/56/10; GAOR, 56th Sess., Supp. No. 10 (2001) [hereinafter ILC Commentaries], available at http://untreaty.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf.
8. There is one previous source of which we are aware that comprehensively addresses remedies in general international law (as opposed to trade law) from an economic perspective.
9. Joost Pauwelyn, Optimal Protection of International Law (2008).
10. Pauwelyn argues that the default remedy for violation of international law should be a property rule, by which he means that a state may not acquire another state's legal entitlement without the consent of the latter state. Id. at 45. As this Article will make clear, we take the opposite view. Other prior work that takes an economic approach to remedial issues and that overlaps with aspects of our argument is cited infra in note 52.
11. The dearth of attention also perhaps reflects the widespread tendency of international law scholars to assume that states have a "[p]ropensity to comply" with international law.
12. Abram Chayes & Antonia Handler Chayes, The New Sovereignty: Compliance with International Regulatory Agreements 3 (1995), accompanied by a normative commitment to maximizing compliance with international law.
13. See infra Section I.A.
14. Jack L. Goldsmith & Eric A. Posner, The Limits of International Law (2005);
15. Andrew T. Guzman, How International Law Works: A Rational Choice Theory (2008);
16. Eric A. Posner & Alan O. Sykes, Economic Foundations of International Law (forthcoming 2011);
17. Eric A. Posner, The Perils of Global Legalism (2009) [hereinafter Posner, Perils];
18. Robert E. Scott & Paul B. Stephan, The Limits of Leviathan: Contract Theory and the Enforcement of International Law (2006);
19. Joel P. Trachtman, The Economic Structure of International Law (2008).
20. Some international law may be nothing more than rhetoric for domestic or international political consumption, for example, or may reflect the pursuit of illicit objectives by governments.
21. Goldsmith & Posner, supra note 7, at 45-78 (analyzing how customary international law reduces externalities related to wartime maritime commerce, the breadth of the territorial sea, and ambassadorial immunity, among others);
22. Eric A. Posner, International Law: A Welfarist Approach, 73 U. Chi. L. Rev. 487-522 (2006) (describing the welfarist approach to international law);
23. Alan O. Sykes, International Law, in 1 Handbook of Law and Economics 757 (A. Mitchell Polinsky & Steven Shavell eds., 2007) [hereinafter Sykes, International Law].
24. Kyle Bagwell & Robert W. Staiger, The Economics of the World Trading System 3 (2002); Sykes, International Law, supra note 9, at 762.
25. Id. at 767-68.
26. In general, we refer to a rule of international law as more efficient than an alternative rule if it produces gains for some states that are greater than the losses for others. Our concept of efficiency is thus Kaldor-Hicks rather than Paretian. But international law is plainly subject to participation constraints-nations will not accede to it unless they expect direct gains or gains on some broader set of issues. Accordingly, international law is sometimes accompanied by side payments to ensure that all nations benefit enough to accept the rules. Side payments can be monetary but will perhaps more often take the form of concessions on other issues. For example, the developing world might agree to protect the intellectual property rights of companies in developed countries in exchange for improved access for their textile exports in the markets of developed countries, a story that is often told about the genesis of the WTO Agreement on Trade-Related Intellectual Property Rights ("TRIPs").
27. Suzanne Scotchmer, The Political Economy of Intellectual Property Treaties, 20 J.L. Econ. & Org. 415-26 (2004).
28. To be sure, this political calculus may not correspond to a traditional economic welfare calculus-it is often assumed that producer welfare receives greater political weight than consumer welfare in the formulation of trade policy, for example. See, e.g., Sykes, International Law, supra note 9, at 787.
29. The externality is "pecuniary" because it travels through market prices, but is nevertheless a source of inefficiency because it arises in an environment that is not characterized by perfect competition-the presence of nations that are large enough to influence prices on world markets implies the presence of monopsony power.
30. Harry G. Johnson, Optimum Tariffs and Retaliation, 21 Rev. Econ. Stud. 142, 142 (1953).
31. Johnson assumed that all nations maximize national economic welfare as conventionally defined (national income). See id. More recent work emphasizes that the same class of problems arises when national governments have other maximands that incorporate different "political economy weights" for various interest groups.
32. Gene M. Grossman & Elhanan Helpman, Trade Wars and Trade Talks, 103 J. Pol. Econ. 675-79 (1995).
33. See generally Bagwell & Staiger, supra note 10, at 18-32 (discussing the political economy approach to trade agreements).
34. Montreal Protocol on Substances that Deplete the Ozone Layer, Sept. 16, 1987, 104 Stat. 2649, 1522 U.N.T.S. 3, available at http://ozone.unep.org/Publications/MP_Handbook/Section_1.1_The_Montreal_Protocol/.
35. See, e.g., Sykes, International Law, supra note 9, at 784-86.
36. Michael Kremer et al., The Economics of International Refugee Law, 39 J. Legal Stud. (forthcoming 2011).
37. As noted supra in note 12 and accompanying text, however, an increase in global welfare need not translate into a benefit for every nation absent a side payment mechanism. Accordingly, nations that do not benefit may be tempted to opt out of the legal order. The modern breakdown in aspects of the international refugee system, for example, may be understood as a consequence of the fact that some nations bear disproportionate costs in relation to the benefits they receive. Kremer et al., supra note 18.
38. Giovanni Maggi & Andres Rodriguez-Clare, The Value of Trade Agreements in the Presence of Political Pressures, 106 J. Pol. Econ. 574-576 (1998) ("[I]n the short run the government is fully compensated... for the distortions caused by protection, whereas in the long run the government does not get compensated for the distortion in the allocation of capital.");
39. Robert W. Staiger & Guido Tabellini, Do GATT Rules Help Governments Make Domestic Commitments?, 11 Econ. & Pol. 109-133 (1999) (finding that GATT rules helped the United States government make domestic trade policy commitments that would have otherwise been impossible during the "Tokyo Round" from 1974-79).
40. This explanation for trade agreements may not be entirely convincing, however, given that most of them allow nations to renegotiate commitments or to "escape" from them in the face of protectionist pressures. E.g., General Agreement on Tariffs and Trade arts. XIX, XXVIII, Oct. 30 1947, 61 Stat. A-11, 55 U.N.T.S. 194 [hereinafter GATT] (letting states escape or renegotiate commitments).
41. Jeswald W. Salacuse, The Law of Investment Treaties (2010).
42. Zachary Elkins et al., Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960-2000, 2008 U. Ill. L. Rev. 265-277 (arguing that bilateral investment treaties enable governments to "make a credible commitment to treat foreign investors fairly... by (1) clarifying the commitment, (2) explicitly involving the home country's government, and (3) enhancing enforcement");
43. Alan O. Sykes, Public Versus Private Enforcement of International Economic Law: Standing and Remedy, 34 J. Legal Stud. 631-62 (2005) (arguing that a private right of action for compensatory damages can signal to firms that investments will be free from government interference).
44. Sarah Ludington & Mitu Gulati, A Convenient Untruth: Fact and Fantasy in the Doctrine of Odious Debts, 48 Va. J. Int'l L. 595-637 (2008) (describing but criticizing the argument in favor of the doctrine).
45. Andrew Yianni & David Tinkler, Is There a Recognized Legal Doctrine of Odious Debts?, 32 N.C. J. Int'l L. & Com. Reg. 749 (2007).
46. Restatement (Second) of Contracts § 237 (1981) ("Except as stated in § 240, it is a condition of each party's remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render any such performance due at an earlier time.").
47. Richard R.W. Brooks & Alexander Stremitzer, Remedies On and Off Contract, 120 Yale L. J. 690-699 (2011) (discussing incentive effects of rescission remedies).
48. Steven Shavell, Damage Measures for Breach of Contract, 11 Bell J. Econ. 466-470 (1980). Of course, renegotiation is a possible option in this regard as well, as we discuss below.
49. See E. Allan Farnsworth, Contracts § 8.11 (4th ed. 2004).
50. The locus classicus of this view is offered by Oliver Wendell Holmes.
51. O.W. Holmes, The Path of the Law, 10 Harv. L. Rev. 457-462 (1897) ("The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it,-and nothing else.").
52. The suggestion that the WTO dispute settlement system is designed to facilitate efficient breach is found in an article by Warren F. Schwartz and Alan O. Sykes.
53. Warren F. Schwartz & Alan O. Sykes, The Economic Structure of Renegotiation and Dispute Resolution in the World Trade Organization, 31 J. Legal Stud. S179-S192 (2002) [hereinafter Schwartz & Sykes, Economic Structure] (arguing that the framers of the WTO "framed a dispute resolution system designed to facilitate efficient breach").
54. Subsequent legal and economic literature debating this claim is reviewed in a piece by Sykes.
55. Alan O. Sykes, The Dispute Resolution Mechanism: Ensuring Compliance?, in Oxford Handbook of the World Trade Organization (Amrita Narlikar et al., eds., forthcoming 2012) [hereinafter Sykes, Ensuring Compliance?].
56. Steven Shavell, Foundations of Economic Analysis of Law 297-98 (2004).
57. See, e.g., Sykes, International Law, supra note 9, at 774-77.
58. L.G. Telser, A Theory of Self-Enforcing Agreements, 53 J. Bus. 27, 27 (1980) ("If one party violates the terms then the only recourse of the other party is to terminate the agreement after he discoveres the violation. No third party intervenes to determine whether a violation has taken place.").
59. See, e.g., Goldsmith & Posner, supra note 7, at 111-12.
60. Guzman, supra note 7, at 34-42.
61. See, e.g., Sykes, International Law, supra note 9, at 774-77.
62. Drew Fudenberg & Jean Tirole, Game Theory 150-60 (1991);
63. Eric Rasmus-sen, Games and Information: An Introduction to Game Theory 91-94 (1989).
64. Robert Axelrod, The Evolution of Cooperation (1984).
65. Of course, not all forms of international cooperation involve prisoners' dilemmas. Some treaties solve coordination games. In coordination games, no sanction for deviation is necessary because no one ever deviates. Examples include treaties that establish technical standards for interstate communication and transportation. If one state deviates from these standards, it loses the capacity to interact with other states, and therefore will not deviate. See Goldsmith & Posner, supra note 7, at 32-35.
66. See Bagwell & Staiger, supra note 10, at 32-35.
67. Id. at 95-103.
68. See, e.g., Sykes, International Law, supra note 9, at 799-800.
69. John H. Jackson et al., Legal Problems of International Economic Relations: Cases, Materials and Text 5-6 (5th ed. 2008).
70. See, e.g., Sykes, International Law, supra note 9, at 800.
71. Alan O. Sykes, Constructive Unilateral Threats in International Commercial Relations: The Limited Case for Section 301, 23 Law & Pol'y Int'l Bus. 263-77 (1992).
72. This is the core argument of Schwartz and Sykes. Schwartz & Sykes, Economic Structure, supra note 30, at S202-03.
73. Id.
74. See Posner, Perils, supra note 7, at 134-49.
75. Hans-Peter Kaul, Developments at the International Criminal Court: Construction Site for More Justice: The International Criminal Court After Two Years, 99 Am. J. Int'l L. 370-383 (2005).
76. See Shavell, supra 27, at 475 (noting how expectation damages promote efficient breach).
77. We recognize that expectation damages are an imperfect mechanism in this regard, given the existence of measurement errors and litigation costs. The same types of problems arise under international law, as we discuss below.
78. Outside of the trade literature, the possibility that efficient breach theory might be applied to international law generally has been discussed a few times.
79. Joel P. Tracht-man, The Economic Structure of International Law 142-44 (2008);
80. Jeffrey L. Dunhoff & Joel P. Trachtman, Economic Analysis of International Law, 24 Yale J. Int'l L. 1 (1999);
81. Richard Morrison, Efficient Breach of International Agreements, 23 Denv. J. Int'l L. & Pol'y 183 (1994);
82. John K. Setear, Responses to Breach of a Treaty and Rationalist International Relations Theory: The Rules of Release and Remediation in the Law of Treaties and the Law of State Responsibility, 83 Va. L. Rev. 1 (1997).
83. Trade agreements thus tend to be "politically efficient." See Bagwell & Staiger, supra note 10, at 23-27. The caveat is that political efficiency may not always be attainable because of limits on the viability of self-enforcement. Id. at 95-103.
84. Alan O. Sykes, Protectionism as a "Safeguard": A Positive Analysis of the GATT Escape Clause with Normative Speculations, 58 U. Chi. L. Rev. 255, 300-03 (1991).
85. As noted above, "efficiency" here must be understood as political efficiency from the perspective of affected governments, which need not correspond to economic welfare traditionally defined. See supra notes 10-11 and accompanying text.
86. Alan O. Sykes, Protectionism as a "Safeguard": A Positive Analysis of the GATT "Escape Clause" with Normative Speculations, 58 U. Chi. L. Rev. 255-86 (1991).
87. For the current state of play in this seemingly never-ending dispute, see Measures Concerning Meat and Meat Products (Hormones), World Trade Org., http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds26_e.htm (last updated Feb. 24, 2010).
88. Of course, nations could always in principle renegotiate the legal rules that cause a policy to be in violation of the law. Given the size of the WTO membership (now over 150 nations) and the challenges of reaching agreement with such a large number of members, however, this type of renegotiation is rarely a viable option in the WTO and, as we argue below, is often unrealistic in international law more generally.
89. See Agreement on Safeguards art. 2, para. 2, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 154.
90. See the report of a settlement at Twenty-Year Stalemate Ended; EU, U.S. Settle Beef Hormone Dispute, Farm & Dairy (May 14, 2009), http://www.farmanddairy.com/news/twenty-year-stalemate-ended-eu-us-settle-beef-hormone-dispute/12027.html.
91. Understanding on Rules and Procedures Governing the Settlement of Disputes art. 22, para. 4, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401 [hereinafter DSU]. The standard under the Agreement on Subsidies and Countervailing Measures ("SCMs") is, arguably, slightly different. See Agreement on Subsidies and Countervailing Measures arts. 4.10, 7.9, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 14.
92. See DSU, supra note 61, art. 22, para. 6.
93. E.g., Schwartz & Sykes, Economic Structure, supra note 30, at S180-81; Sykes, Ensuring Compliance?, supra note 30. For a formal treatment of WTO retaliation as an efficient breach mechanism.
94. Gene M. Grossman & Alan O. Sykes, 'Optimal' Retaliation in the WTO-a Commentary on the Upland Cotton Arbitration, 10 World Trade Rev. 133 (2011).
95. Alan Schwartz, The Case for Specific Performance, 89 Yale L. J. 271-277 (1979) ("[D]amage awards actually are undercompensatory in more cases than is commonly supposed; the fact of a specific performance request is itself good evidence that damages would be inadequate; and courts should delegate to promisees the decision of which remedy best satisfies the compensation goal.").
96. Thus, for example, GATT Article XXVIII provides that nations that fail to successfully renegotiate their tariff commitments are nevertheless allowed to withdraw from them, subject to measured retaliation that is in turn subject to binding arbitration. This mechanism may be understood as a response to what would otherwise be an acute holdup problem.
97. See supra notes 37, 47 and accompanying text.
98. See Restatement (Third) of Foreign Relations Law of the United States § 102 (1987).
99. Curtis A. Bradley & Mitu Gulati, Withdrawing from International Custom, 120 Y a l e L. J. 202-33 (2010) (detailing how nations shifted from an absolute view of sovereign immunity to a more restrictive view of the doctrine).
100. See, e.g., Berizzi Bros. v. S.S. Pesaro, 271 U.S. 562, 574-76 (1926) (holding that sovereign immunity barred a breach of contract claim against the Italian government); The Schooner Exch. v. M'Faddon, 11 U.S. (7 Cranch) 116, 145-47 (1812) (holding that sovereign immunity absolutely barred American citizens from laying claim to a French warship seized in U.S. waters).
101. See Bradley & Gulati, supra note 68, at 232 (noting that countries began to recognize a commercial activity or private action exception to the default rule of sovereign immunity during the twentieth century);
102. Gary Born & Peter Rutledge, International Civil Litigation in United States Courts 219-24 (4th ed. 2007) (describing the evolution of the law).
103. International Covenant on Economic, Social, and Cultural Rights, adopted by the General Assembly Dec. 19, 1966, 993 U.N.T.S. 3 [hereinafter ICESCR].
104. See infra Section II.C.2.b.
105. See generally Agreement on Technical Barriers to Trade, Arts. 2-3, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1868 U.N.T.S. 120.
106. Of course, when sanctions are themselves costly, a ceiling on retaliation may still be desirable. See infra Section II.A.2.
107. See Setear, supra note 52, at 70;
108. Eric A. Posner & Alan O. Sykes, An Economic Analysis of State and Individual Responsibility Under International Law, 9 Am. L. & Econ. Rev. 72, 114-15 (2007).
109. Mostafa Beshkar, Optimal Remedies in International Trade Agreements, 54 Eur. Econ. Rev. 455 (2010) (discussing the costs of sanctions with respect to trade).
110. A. Mitchell Polinsky & Daniel L. Rubinfeld, The Welfare Implications of Costly Litigation for the Level of Liability, 17 J. Legal Stud. 151 (1988).
111. Id. at 159-60.
112. See Axelrod, supra note 38, 119-20 (discussing the tit-for-two-tats strategy).
113. Such adjustments are familiar in other contexts. For example, the possibility that a tortfeasor may commit a tort without detection offers a standard economic justification for increasing the level of damages, and has been suggested as a basis for punitive damages in some cases.
114. A. Mitchell Polinsky & Steven Shavell, Punitive Damages: An Economic Analysis, 111 Harv. L. Rev. 869-74 (1998).
115. This type of claim was often advanced in the multilateral trading system before the advent of the WTO. See, e.g., Aggressive Unilateralism: America's 301 Trade Policy and the World Trading System (Jagdish Bhagwati & Hugh T. Patrick eds., 1990). In the context of general international law, see Pauwelyn, supra note 4, at 49-50.
116. Schwartz & Sykes, Economic Structure, supra note 30, at S200-04.
117. Some subtle issues still arise. Most importantly, delays in litigation create what is sometimes termed the "3-year free pass" for WTO violators. See Sykes, Ensuring Compliance?, supra note 30, at 20. A nation can violate WTO law and avoid any sanction until adjudication has finished and the violator has been given a "reasonable period of time" to correct its behavior. See DSU, supra note 61, art. 21, para. 3. If such conduct becomes flagrant, one might argue, a role for unilateral countermeasures remains.
118. See generally Posner, Perils, supra note 7 (discussing these problems in connection with the International Court of Justice).
119. Id. at 145-49.
120. See id. at 140-148.
121. See Bagwell & Staiger, supra note 10, at 30.
122. Alan V. Deardorff & Robert M. Stern, Current Issues in Trade Policy: An Overview, in U.S. Trade Policies in a Changing World Economy 15-38 (Robert M. Stern ed., 1987).
123. In the trade area, for example, the benefits of cooperation with small states might relate, inter alia, to their promises to respect the intellectual property rights of developed country exporters. The threat to back away from intellectual property commitments under the WTO TRIPs Agreement may then represent a potent threat. See DSU, supra note 61, art. 22, para. 3 (allowing for such cross retaliation).
124. See Damrosch et al., supra note 1, at 713.
125. Indeed, sanctions (and threats of sanctions) that impose substantial costs on the violator at the least cost to the party imposing the sanction are the most likely to be effective.
126. Jonathan Eaton & Maxim Engers, Sanctions, 100 J. Pol. Econ. 899-909 (1992).
127. E.g., Guzman, supra note 7, at 73-78 (proposing a reputational theory of compliance).
128. Rachel Brewster, The Limits of Reputation on Compliance, 1 Int'l Theory 323-30 (2009);
129. Rachel Brewster, Unpacking the State's Reputation, 50 Harv. Int'l L.J. 231-62 (2009) (arguing that the reputational model fails to take into consideration the different time horizons of the indefinite state and the relatively short-term governments that control them, or to adequately consider differing costs of compliance for different treaty regimes).
130. See generally Fudenberg & Tirole, supra note 37, ch. 9 (investigating the idea that a player who repeatedly plays a game in the same way will create expectations that he will play similarly in the future, thereby causing his opponents to adjust their own play).
131. Tom R. Tyler, Why People Obey the Law (1990).
132. ILC Draft, supra note 3.
133. Id. art. 22; see also id. art. 49 (establishing the object and limits of countermeas-ures).
134. Id. art. 51.
135. Id. art. 50, para. 1.
136. ILC Commentaries, supra note 3, at 131-34, cite dicta in a handful of cases, and- somewhat more persuasively-the nonderogation provisions in human rights treaties and the prohibitions on reprisals in the Geneva Conventions.
137. William Joseph Buckley, The Strength of an Argument: A Response to General Clark's Essay, in Kosovo: Contending Voices on Balkan Interventions 256 (William Joseph Buckley ed., 2000) (discussing high altitude bombing);
138. Jonathan Charney, Anticipatory Humanitarian Intervention in Kosovo, 93 Am. J. Int'l L. 841 (1999) (noting violation of UN Charter).
139. Gary Clyde Hufbauer et al., Economic Sanctions Reconsidered 158-60 (3d ed. 2007) (concluding that economic sanctions failed to achieve their goals in a large majority of the 204 cases studied).
140. United States Diplomatic and Consular Staff in Tehran (U.S. v. Iran), 1980 I.C.J. 3, ¶ 86 (May 24).
141. ILC Draft, supra note 3, art. 52.
142. Anthony Aust, Modern Treaty Law and Practice 304 (2000), for the view that this rule has entered customary international law.
143. ILC Draft, supra note 3, arts. 31, 34. The principle was first recognized by an international court in Factory at Chorzów (Ger. v. Pol.), 1928 P.C.I.J. (ser. A) No. 17, at 29 (Sept. 13) (holding that "any breach of an engagement involves an obligation to make reparation" as part of determining whether Poland owed reparations to Germany for seizing a German factory); Factory at Chorzów (Ger. v. Pol.), 1927 P.C.I.J. (ser. A) No. 9, at 21 (July 26) ("It is a principle of international law that the breach of an engagement involves an obligation to make reparation in an adequate form.").
144. ILC Draft, supra note 3, art. 35.
145. Id. art. 36.
146. Air Service Agreement of 27 March 1946 between the United States of America and France, 18 R.I.A.A. 417 (Perm. Ct. Arb. 1978). This arbitration is discussed in ILC Commentaries. ILC Commentaries, supra note 3, at 134.
147. Air Service Agreement of 27 March 1946 between the United States of America and France, 18 R.I.A.A. 417, ¶ 2.
148. Id. ¶ 17.
149. Id. ¶ 99.
150. In any event, the tribunal did not attempt to determine the relevant costs.
151. Air Service Agreement of 27 March 1946 between the United States of America and France, 18 R.I.A.A. 417, ¶ 83.
152. Arie E. David, The Strategy of Treaty Termination ch. 9 (1975).
153. For a discussion of this point, see Posner & Sykes, supra note 75, at 114-21.
154. See Jackson et al., supra note 43, at 217-22.
155. See Schwartz & Sykes, Economic Structure, supra note 30, at S193-94.
156. Grossman & Sykes, supra note 63, at 158-59.
157. Id. at 150; see also Beshkar, supra note 76, at 460-63.
158. DSU, supra note 61, art. 23.
159. See Schwartz & Sykes, Economic Structure, supra note 30, at S200.
160. See generally The Law, Economics and Politics of Retaliation in WTO Dispute Settlement (Chad P. Bown & Joost Pauwelyn eds., 2010) (compiling essays that analyze the WTO system).
161. See Grossman & Sykes, supra note 63, at 151.
162. See Salacuse, supra note 21.
163. Jeswald W. Salacuse & Nicholas P. Sullivan, Do BITs Really Work?: An Evaluation of Bilateral Investment Treaties and Their Grand Bargain, 46 Harv. Int'l L.J. 67-90 (2005) (describing the dispute resolution mechanisms in most BITs).
164. The treaties face complex but fairly standard questions about how to value assets, which has been the topic of numerous arbitration proceedings and a small amount of academic literature.
165. Manuel A. Abdala & Pablo T. Spiller, Damage Valuation of Indirect Expropriation in International Arbitration Cases, 14 Am. Rev. Int'l Arb. 447-59 (2003) (discussing valuation methodologies).
166. As the literature on domestic takings points out, however, the compensation requirement may not yield efficient takings in the traditional welfare-economic sense. Governments may not internalize the benefits of takings, for example, and so a requirement of compensation could lead to too few takings. Likewise, when investors anticipate compensable takings, they may overinvest in socially wasteful measures to increase the value of their property in advance. See Shavell, supra note 31, at 129-34.
167. See ADC Affiliate Ltd. v. Republic of Hung., ICSID Case No. ARB/03/16, Award (Oct. 2, 2006), http://ita.law.uvic.ca/documents/ADCvHungaryAward.pdf.
168. Id. ¶¶ 80-213.
169. Id. ¶ 203.
170. Id. ¶¶ 479-500.
171. See id. For a similar case, see Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/02/8, Award (Feb. 6, 2007), http://ita.law.uvic.ca/documents/Siemens-Argentina-Award.pdf (discussing the violation of a contract to revise and operate a national identity system).
172. Charles N. Brower & Michael Ottolenghi, Damages in Investor-State Arbitration, 4 Transnat'l Disp. Mgmt. 1-13 (2007) (brackets and internal quotation marks omitted) (citing Derek William Bowett, State Contracts with Aliens: Contemporary Developments on Compensation for Termination or Breach, 1988 Brit. Y.B. Int'l L. 49, 61).
173. SEDCO, Inc. v. Nat'l Iranian Oil Co. & Islamic Republic of Iran, 10 Iran-U.S. Cl. Trib. Rep. 180, 205 n.40 (1986) (opinion of Brower, J.).
174. Of course, the mere reference of the substantive dispute to impartial arbitration is not by itself enough to protect investors-investors must also feel confident that an arbitral judgment can be enforced or collected. To some degree, nations will comply with awards voluntarily; here, their compliance with or resistance to the enforcement of awards may indeed affect their "reputations" in world capital markets. But when nations resist enforcement, tricky issues can and do arise because of longstanding statutory and common law doctrines relating to sovereign immunity and act of state. These issues are beyond the scope of our analysis but are assuredly important in practice.
175. These rules are codified in the four Geneva Conventions. See Geneva Convention for the Amelioration of the Condition of the Wounded and Sick in the Armed Forces in the Field, Aug. 12, 1949, 6 U.S.T. 3114, 75 U.N.T.S. 31; Geneva Convention for the Amelioration of the Condition of the Wounded, Sick and Shipwrecked Members of the Armed Forces at Sea, Aug. 12, 1949, 6 U.S.T. 3217, 75 U.N.T.S. 85; Geneva Convention Relative to the Treatment of Prisoners of War, Aug. 12, 1949, 6 U.S.T. 3316, 75 U.N.T.S. 135; Geneva Convention Relative to the Protection of Civilians in Time of War, Aug. 12, 1949, 6 U.S.T. 3516, 75 U.N.T.S 287.
176. Bonnie Docherty, The Time is Now: A Historical Argument for a Cluster Munitions Convention, 20 Harv. Hum. Rts. J. 53, 56-57 (2007) (providing a brief history of weapon ban treaties).
177. It is possible that states do better by treating prisoners humanely because that encourages enemy soldiers to surrender. But if that is the case, then laws are not necessary to ensure humane treatment.
178. Eric A. Posner, Terrorism and Laws of War, 5 Chi. J. Int'l L. 423-30 (2005).
179. Some commentators distinguish reprisals and "reciprocal measures," where the latter involve violations of obligations that "correspond to or are directly connected with the obligation breached." Damrosch et al., supra note 1, at 713. We do not believe this distinction has any importance and do not address it here.
180. Francis Lieber, Instructions for the Government of Armies of the United States in the Field 34 (Government Prtg. Office 1898) (1863) [hereinafter Lieber Code];
181. Michael A. Newton, Reconsidering Reprisals, 20 Duke J. Comp. & Int'l L. 361-73 (2010).
182. James D. Morrow, When Do States Follow the Laws of War?, 101 Am. Pol. Sci. Rev. 559, 562-66 (2007) (finding "a broad pattern of reciprocity" through empirical analysis of the Correlates of War data).
183. Convention Relative to the Treatment of Prisoners of War art. 2, July 27, 1929, 47 Stat. 2021, 118 L.N.T.S. 343.
184. See Geneva Convention for the Amelioration of the Condition of the Wounded and Sick in the Armed Forces in the Field, supra note 136, art. 46.
185. Protocol Additional to the Geneva Conventions of 12 August 1949, and Relating to the Protection of Victims of International Armed Conflict (Protocol I) arts. 51-56, adopted June 8, 1977, 1125 U.N.T.S. 3; see also Newton, supra note 141, at 376.
186. But see Philip Sutter, The Continuing Role for Belligerent Reprisals, 13 J. Conflict & Security L. 93, 93-94 (2008) (contending that the sole use of tribunals would result in some violators of war crimes being unpunished, which would create a place for the continued use of belligerent retaliation). See generally Frits Kalshoven, Belligerent Reprisals (2d ed. 2005) (tracing the history of belligerent reprisals from ancient to modern times and finding that they are nearing total prohibition).
187. See Vienna Convention on the Law of Treaties art. 21, May 23, 1969, 1155 U.N.T.S. 331.
188. Convention on the Prohibition of Military or Any Other Hostile Use of Environmental Modification Techniques, opened for signature May 18, 1977, 31 U.S.T. 333, 1108 U.N.T.S. 151 (entered into force Oct. 5, 1978).
189. Id. art. I.
190. Id. art. V, para. 5.
191. Declarations and Reservations, UN Treaty Collection, http://treaties.un.org/pages/ViewDetails.aspx?src=IND&mtdsg_no=XXVI-1&chapter=26&lang=en (last visited Aug. 13, 2011).
192. International Covenant on Civil and Political Rights art. 10, adopted by the General Assembly Dec. 19, 1966, 999 U.N.T.S. 171 [hereinafter ICCPR].
193. Id. at 290 ("The Government of Denmark makes a reservation in respect of Article 10, paragraph 3, second sentence.").
194. Vienna Convention on the Law of Treaties, supra note 147, art. 19(c).
195. Louis Henkin, Editorial Comment, U.S. Ratification of Human Rights Treaties: The Ghost of Senator Bricker, 89 Am. J. Int'l L. 341-48 (1995) (expressing discomfort with reservations).
196. Reservations are unnecessary on tariff concessions because a nation can simply decline to give that particular concession in the first place. WTO law does provide, however, certain excuses for nonperformance of other obligations based on pressing needs (such as the protection of human health or national security). See, e.g., General Agreement on Tariffs and Trade, supra note 20, arts. XX-XI. We also observe certain plurilateral agreements (such as the WTO Agreement on Government Procurement) to which only a subset of WTO members have acceded. In short, the "reservation" issue is handled in other ways.
197. Laurence R. Helfer, Exiting Treaties, 91 V a. L. R e v. 1579-1589 (2005) (describing lawful exit from treaties through minimal procedural conditions as one of six distinguishing features of treaty exit).
198. Bradley & Gulati, supra note 68, at 275 (criticizing conventional scholarly view that customary international law is binding on states except those that persistently object through affirmative international communication prior to the creation of the norm).
199. Cf. Gabcíkovo-Nagymaros Project (Hung. v. Slovk.), 1997 I.C.J. 7 (Sept. 25) (resolving a dispute over a joint project to build a system of locks on the Danube River from which Hungary unilaterally withdrew).
200. See supra note 158 and accompanying text.
201. Eric A. Posner & Alan O. Sykes, Economic Foundations of the Law of the Sea, 104 Am. J. Int'l L. 569 (2010).
202. United Nations Convention on the Law of the Sea, opened for signature Dec. 10, 1982, 1833 U.N.T.S. 397 (entered into force Nov. 16, 1994).
203. Proclamation No. 2667, Policy of the United States With Respect to the Natural Resources of the Subsoil and Sea Bed of the Continental Shelf, 10 Fed. Reg. 12,303 (Sept. 28, 1945).
204. Joseph J. Kalo et al., Coastal and Ocean Law: Cases and Materials 376 (3d ed. 2007).
205. U.N. Charter art. 2, para. 4 ("All Members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state...."); id. art. 42 (authorizing the Security Council to sanction the use of force if nonforce measures are inadequate); id. art. 51 ("Nothing in the present Charter shall impair the inherent right of individual or collective self-defense if an armed attack occurs against a Member of the United Nations....").
206. To be sure, it is possible that war improves well-being when people in the conquered territory become subject to a better government, or when realigned boundaries facilitate more efficient provision of public goods.
207. Eric A. Posner & Alan O. Sykes, Optimal War and Jus Ad Bellum, 93 Geo. L.J. 993-1006 (2005).
208. U.N. Charter arts. 2, 51.
209. Id. art. 42.
210. Id. art. 23.
211. See Sykes, International Law, supra note 9, at 818-21.
212. See, e.g., S. Bluefin Tuna Case (Austl. & N.Z. v. Japan), Award on Jurisdiction and Admissibility, 39 I.L.M. 1359, ¶ 34 (UNCLOS Arb. Trib. 2000) (describing a dispute that arose after Japan increased the tonnage of Southern Bluefin Tuna that it fished in violation of a prior agreement with New Zealand and Australia);
213. Karol de Zwager Brown, Truce in the Salmon War: Alternatives for the Pacific Salmon Treaty, 74 W a s h. L. R e v. 605-68 (1999) (cataloging the history of the dispute between Canada and the United States regarding the 1985 Pacific Salmon Treaty, which both countries violated in an escalating series of retaliation).
214. ICCPR, supra note 152.
215. ICESCR, supra note 71.
216. For a brief overview of human rights treaties sponsored by the United Nations, see Louis Henkin et al., Human Rights 214-23 (2d ed. 2009).
217. Beth A. Simmons, Mobilizing for Human Rights: International Law in Domestic Politics 357 (2009) for the latest and most comprehensive contribution to a large literature. Simmons's results are somewhat stronger than those of earlier authors.
218. Monica Hakimi, Essay, Secondary Human Rights Law, 34 Yale J. Int'l L. 596-602 (2009) (attributing the rise of alternative enforcement mechanisms for human rights to "erratic incentive[s]" faced by states to police other states' behavior);
219. A.M. Weisburd, Implications of International Relations Theory for the International Law of Human Rights, 38 Colum. J. Transnat'l L. 45, 101-08 (1999) (explaining low levels of compliance with human rights treaties as the result of the prevalence of competing foreign policy interests or the lack of will by powerful countries to enforce them).
220. See, e.g., U.N. Comm. on Econ., Soc. & Cultural Rights, General Comment No. 19: The Right to Social Security, 39th Sess., Nov. 5-23, 2007, ¶ 41, U.N. Doc. E/C.12/GC/19 (Feb. 4, 2008) (requiring only that states develop plans for full implementation of the right to social security because of a recognition of the "significant financial implications" social security programs contain); U.N. Comm. on Econ., Soc. & Cultural Rights, Substantive Issues Arising in the Implementation of the International Covenenant on Economic and Cultural Rights-General Comment No. 14: The Right to the Highest Attainable Standard of Health, 22d Sess., Apr. 25-May 12, 2000, ¶¶ 5, 30-31, U.N. Doc. E/C.12/2000/4 (Aug. 11, 2000) (acknowledging that states face constraints outside of their control that necessitate progressive realization of the rights guaranteed in the ICESCR); see also ICESCR, supra note 71, art. 2, para. 3 (allowing developing countries to determine the extent to which they will guarantee ICESCR rights in light of their national economy).
221. See, e.g., Hamdan v. Rumsfeld, 548 U.S. 557, 626-34 (2006) (applying Article 3 of the Geneva Convention to analyze the procedures used to try prisoners at Guantanamo);
222. Jordan J. Paust, War and Enemy Status After 9/11: Attacks on the Laws of War, 28 Yale J. Int'l L. 325, 328-34 (2003) (determining that the Geneva Convention is adequate to govern the United States' treatment of War on Terror prisoners).
223. Robert Chesney & Jack Goldsmith, Terrorism and the Convergence of Criminal and Military Detention Models, 60 Stan. L. Rev. 1079, 1108-20 (2008) (describing procedures of military detention as converging with criminal procedures in the years following September 11).
224. When an individual's participation in such organizations is unclear or questionable, however, legal protections may be justified as a way of avoiding offense to foreign sovereigns.
225. For an extended discussion, see generally Newton, supra note 141 (and citations therein) and Posner, supra note 139.